Protecting Assets when Funding Care
"I want my children and grandchildren to benefit from the assets that I’ve worked so hard to acquire"
No-one wants to see the money for which they have worked throughout their lifetime disappear after a few years stay in a care home. Many think there is no option but to watch their assets dwindle. However with good financial advice there are many options that can improve the situation and protect assets for future generations.
The Care Plan
(Sometimes called an immediate care plan, care fees payment plan or care annuity)
- If Mrs Edgar does nothing with her money she will run down to local authority funding after 6 years.
- Mrs Edgar can buy a care plan for £95,000 which will pay out £20,800 a year increasing at 5% each anniversary. The benefit is payable for life, no matter how long Mrs Edgar lives.
- The care plan should cover Mrs Edgar’s current care needs for the rest of her life.
- Once the care plan has been bought £105,000 is left in Mrs Edgar’s estate. This is basicaly protected for her family and could be invested.
- The longer that Mrs Edgar lives the more she might leave her family.
Get an estimate here of what a care plan might cost you
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The Deferred Care Plan
If Mrs Edgar was concerned about paying £95,000 but still wanted the security of a lifetime guaranteed income she could buy a deferred care plan. In this example the plan would cost £48,000 and would provide £20,800 a year after a waiting period of three years. This is then payable for life and increases at 5% a year.
After buying the plan Mrs Edgar pays for her care from her savings accounts as normal. However, she knows that she is only going to have to pay for three years. After that the care plan will pay its benefit.
- If Mrs Edgar dies in the early years her estate has lost only the £48,000 and the money paid out to that date.
- After three years Mrs Edgar will have paid out £65,800 in care fees and the £48,000 for the plan, potentially protecting £86,200.
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Investment
If Mrs Edgar were to invest her money rather than leaving it in her current account she could improve the length of time the money lasts before it falls to local authority funding levels. If she were to get a net return of 3% a year her money would last 7 years and 11 months. If she achieved a 6% net annual return her money would last 9 years and 3 months.
This could improve the amount of capital protected.
Talk to an adviser about investing for care
Assumptions and Warnings
We have made the following assumptions
- Income and benefits will increase at 3% a year
- Care fees will increase at 6% a year
- Local authority funding limits will increase by 1% a year
The care plan premiums shown are estimated for this example
A care plan never acquires a cash in value and there is no return to the estate on death regardless of when this may occur (unless additional capital protection is purchased).
Investments can fall in value as well as rise and there is no suggestion that the returns shown will be achievable.